37 Signals says cloud repatriation plan has already saved it $1 million

David Heinemeier Hansson, CTO of SaaS project management outfit 37Signals, has posted an update on the cloud repatriation project he’s led, writing that it’s already saved the company $1 million.

Hansson has previously revealed that his company spent $3.2 million a year on cloud computing, most of it at Amazon Web Services. His repatriation plan called for the company to spend $600,000 on eight meaty servers that each pack 256 virtual CPUs, and have them hosted at an outfit called Deft.

That plan was projected to save $7 million over five years.

In his Saturday post, Hansson wrote he now thinks he can find $10 million of savings in the same period.

“Our cloud spend is down by 60 percent already… from around $180,000/month to less than $80,000,” he wrote, qualifying that the number excludes the cost of Amazon Web Services’s Simple Storage Service. “That’s a cool million dollars in savings at the yearly run rate, and we have another big drop coming in September, before the remaining spend will petter out through the rest of the year,” he added.

The CTO revealed that the 37 Signals ops team remains the same size even though it now tends its own hardware, which cost “about half a million dollars”.

Some other costs rose, but Hansson wrote “by the basic comparison of money saved vs money spent, we’ll be in the money on the big purchase with the current monthly savings in less than six months. That’s just astounding!”

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He didn’t detail how he thinks 37 Signals will get to the $10 million savings figure he now thinks is achievable. Perhaps he’s referring to his company’s cloud storage bill, which he’s yet to address.

Hansson also opined that other comparable companies could save more than he’s managed.

“From having looked at the unoptimized cloud bills at other software companies, our savings may in fact be modest compared to what’s possible,” he wrote, noting that Snapchat has reportedly spent three billion dollars on the cloud in the past five years.

“Don’t tell me there was a billion or so in potential savings on that tab,” he wrote, before commenting on the odd economics of StartupLand with the observation “That didn’t used to matter, because who cared if the business was profitable or not, but now it sorta does!”

Hansson’s remarks on cloud costs are always qualified as he recognises that a SaaS outfit’s needs are different to most other users’. But major clouds are sensitive to customer feedback that their services are expensive, and costs are hard to track.

Microsoft and AWS have both emphasised “optimization” efforts to ensure customers aren’t spending unnecessarily on their services, and even took the step of making them known during quarterly earnings calls so investors could understand those efforts.

The optimisation programs came as demand for cloud services slowed.

But growth of cloudy services remains strong – analyst firm Gartner last week told The Register cloud spend continues to rise at 15 percent a year, compared to three percent for the rest of the business technology market. ®

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